Date: Jun 18, 2019
Category: Analysis Essay
Analysis essay

Mel’s County Café was started in 1977 by Weirich family. It was founded by Richard Weirich for his wife Mary, and it was initially called Mary’s Fried Chicken. The café was renowned for using ingredients available in the local farms and their home-cooked meals. Mary’s fried chicken changed its name to Mel’s Café named after their only daughter. In 1992, the business went through a rough time with Mary’s passing away. However, the business picked up in 1994 and rose back to its previous success. The business expanded its menu with more varieties of burgers being introduced. Further, it has been doing well with most of the family members joining in to help with its running.

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Evaluation of the Business Model

A business model can be simply defined as a framework or plan for owning and operating a business. It is what determines whether the business will be successful or fail. Business models entail the services and products the company provides and how it delivers them to its customers. Pricing structures and payment for services and goods sold is also included in the business model. A sound business model is crucial because it ensures a long-term thriving of the business in question. In order to make the right decision on whether to buy an already existing business, there is the need to conduct an evaluation of the business model before making the decision. The following aspects are what one should take into consideration when evaluating a business model.

How profitable is the venture? Profitability is very important because of how profitable a company or business is determining the survival rate of that particular business in the long term. Profit is analyzed after all the business expenses have been covered and the products have been delivered to the consumers. Income statements are required here in order to assess the profitability of the business. Over the years, Mel’s Country Café has been quite profitable because it has expanded greatly and employed more staff. It has expanded its menu to include a variety of burgers and more of country favorite dishes such as chicken fried steak and fried catfish. With this rate of profit, Mel’s Country Café promises to be a business that will continue to grow in the future.

Simplicity in Running the Business

For a business to be successful, it needs to apply a business model that is clear and easy to run. A business whose operations are run on a chain of events is more vulnerable to disruptions and obstacles. Implementation of the business plans becomes very difficult in such a situation. However, a company with clear operations information is less vulnerable in terms of risks and failure in plan implementation. Mel Country Café is the business whose operations are very clear and simple to understand. The fact that the business is run by a family makes it so easy to plan and implement those plans in order to achieve its goals.

Longevity of the Business

A business model that is based on selling products or services that are a fad usually tends to phase out as soon as something better hits the market and does not survive in the long-term. Therefore, a business model needs to base on selling products that will always be in demand no matter the changes that occur in the market. Such products include food products. Mel Country Cafe is a very viable business with great longevity because it deals with food. As long as man exists, food will always be trendy and demanded.

Portability

Replicating some business models such as franchise in a range of locations is possible as long as each has its owner-operators. Business expansion of this nature holds great potential for long-term growth and profitability. However, for some businesses, this may not be such a good idea especially if the business has established a concrete client base. Such a business is said not to be portable, but it still earns the owners a respectable livelihood. Mel’s Country Cafe is more of a non-portable business because it has established good customer relationships, and, therefore, it is a profitable business to venture into. Expansion into different locations would not be such a brilliant idea because it would take much time and investment before getting loyal customers.

As far as training of the staff is concerned, the assessment for the business in question is that it would not be necessary because my intention is to retain the current staff at Mel’s Country. I feel this would be the best option because the employees are already familiar with the operations of the business and can offer some insight into how the business is run. Keeping the existing staff also saves time that would have been spent on recruiting and training new employees. This way, it is possible to save money and energy which you can be applied elsewhere in the business.

Areas to Investigate During the Feasibility Study

Financial Statements

These are statements that will help assess the financial status of the business. They include income statements, balance sheets, and other operations documents. Some of the accounts that should be given full attention include;

  • Accounts payable; they indicate the debts and liabilities that the company is yet to make payments. With this information, the buyer can identify any contingent or undisclosed liabilities
  • Accounts receivable; information on Mel’s Country Café’s credit policies can be derived from studying and understanding these accounts. I will, therefore, be able to understand accounts that are overdue and those which have been pledged as collateral.
  • Inventory; information on how the inventory is valued, the condition of the inventory and owner inventory methods at Mel’s Country Café can be accessed here.
  • Fixed assets documents; these are documents giving information on machinery, and the buildings that the company owns will enable me to assess their condition and how they should be maintained. A depreciation schedule on the assets will also assist in determining the age of the assets.

Sales Records

I also intend to look into Mel’s sales records because I feel that financial statements only will not give me details on the bestselling product (food), which is very important when coming up with a marketing strategy.

Lease Agreements

Studying these documents will help me understand Mel’s lease agreements and rental obligations. This information does not only help to understand the length of the contracts that Mel’s is involved in but also all other agreements with the landowners and community.

Legal Issues

An intelligent buyer always ensures that they are well aware of the business’s legal issues and their position or standing with the revenue authority (Johnston, & Johnston, 2006). With this information, I will be able to understand if any lawsuits have been filed against Mel’s Country Café, and if there any, the implication they have on the company’s performance. I will also be able to understand whether the business is in full compliance with the safety and environmental regulations of Texas.

Areas to Negotiate

There is a need for negotiations on how long Mel’s initial owners will stay in the business since this aspect further might lead to unnecessary legal complications. Although this might lead to negotiations on the compensation in terms of salary, this way is more lenient for the buyer. Negotiations on the value of the assets are also necessary because the depreciation rates will need to be assessed so as to determine the total value of the business.

Advantages and Disadvantages of Buying a Business

Buying an already existing business, most of the time pay compared to starting up a new one whose likelihood of success is almost impossible to predict. The following are some of the advantages of buying a business such as Mel’s Country Café:

No startup stage involved. Starting a new business is always very stressful and requires a lot of commitment in order to be able to get through the startup stage successfully. It is even harder in the food and restaurant business because people are very particular about the food they eat. However, this is not the case when buying such a business because this stage has already been dealt with by the previous owner. All the requirements such as registration with the necessary authority like the IRS has already been done. The brand has been created as in the case of Mel’s because they have already established a name for themselves in the restaurant industry. All that is needed for the new owner is to take over and proceed with the business.

Inheriting equipment, suppliers, customers, and employees. Since Mel’s already has the equipment, there is no need to buy new equipment unless some upgrading is necessary. Inheriting a loyal customer base saves money and effort that would have been poured into advertising and marketing if it were a new business. Retaining staff also saves time and money because no recruitment and training will be necessary. Since Mel’s has suppliers who were supplying them with new materials, it will not be necessary to seek out new suppliers unless there is a dispute that cannot be solved amicably.

Disadvantages

Inheriting disloyal employees may be a problem when buying an existing business venture. A new owner may face difficulties with establishing and gaining trust from the old employees especially if they feel threatened and feel that their loyalty can only lie with their previous employer. However, this can be solved by listening to the employees and assuring them on their job security.